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Fascinating piece in AdWeek detailing the tough economic times that face marketers, but explaining how an aggressive approach to gaining market share actually can turn hard times into hard cash.

It isn’t hard to quantify the nation’s economic difficulties, AdWeek writes. “Houses are worth less, home-equity lines of credit are being suspended, jobs are at risk, wages aren't keeping up with inflation and energy prices continue to soar, eating away at Americans' disposable income.” And the hard times seem to be cutting across most demographic lines, affecting people at almost every economic level. And marketers are responding to the times by cutting back; Forrester Research projected earlier this year that “77 of nearly 100 global-marketing chiefs expect their budgets to be flat or shrink this year, posting on average a decline of 3 percent.”

And, AdWeek writes, “By some estimates, consumer spending on essential goods now accounts for 57 cents out of every dollar spent in the U.S., the highest since record keeping began in 1960 -- and a percentage expected to grow. That's evident in big shifts and small details. In June, for instance, discount stores like Wal-Mart and Costco posted a category increase of 6 percent in sales compared to full-price department stores, which saw a 3.8 percent drop; while consumers are giving up their Starbucks lattes, they're turning to cheap staples like pasta and peanut butter, which saw respective increases of 13 percent and 5 percent in the 12 months to June; and coupon redemption -- in decline since the last recession -- is back, with food products showing the biggest usage.”

One comment in the story that seems to make sense comes from Gary Stibel, CEO of The New England Consulting Group, who makes the case to AdWeek “that downturns are opportunities to build share at the expense of competitors who are cutting back. The major challenge for marketers, he says, is to strike the right balance between pricing and marketing support.

"’Pricing decisions are almost a daily, certainly weekly, focus of discussion for marketers now. It's no longer a monthly consideration,’ Stibel notes. ‘These are the times when the best marketers thrive. The smart money takes more aggressive pricing than average and then spends it back to grow share, even if it means taking a hit on earnings.’”

A good example of this, according to the story: “Wal-Mart, which increased its measured media ad spending 82 percent from January through May 2007 to $234 million January through May 2008, per Nielsen Monitor-Plus, reported its best monthly sales gain in June in four years. The company had a jump on the current downturn: After straying from Sam Walton's founding edict of low prices, the retailer returned to its roots last year after hiring The Martin Agency, which crafted the ‘Save money. Live better’ strategy.”

KC's View:
Granted, there may be a little self-interest at work when AdWeek comes out with a story suggesting that even in a recession, advertising and marketing can work wonders.

But put that aside for a moment. The argument makes sense.

Too often, businesses react to hard economic times and declining sales by cutting back and uttering nostrums such as “we have to get back to basics.” Which has always seemed silly to me…mostly because if you haven't been taking care of the basics all along, a business decline is probably a little late to be getting back to so-called fundamentals.

Now is the time not just to be aggressive on pricing, but to find new and relevant easy to define value that will transcend economic hard times. After all, everybody is looking to reduce prices and highlight promotions. It is in the other stuff – the products, the services, the unique take on what a food retail experience should be – that competitive wars are won and lost.

The best metaphor that I can find for this is in automobile racing. Years ago, I took a racing course at the excellent Skip Barber School in Lime Rock, Connecticut. One of the lessons I learned – and it came hard to me – was the importance of speeding into the curves. Bruce MacInnes, one of the coaches during my time at Skip Barber, explained it thus: It is on the curves – where you have to know how to take the right line from one point to the next – that races are won and lost.

And it is on the curves where businesses often set the pattern for success or failure.

By the way, if you’re interested…I wrote a piece about my race car driving experience that first appeared in Chain Store Age and then was reprinted here on MNB. You can check it out at: